Thursday, September 26, 2013

Talking about product life cycles

Products sales can be demonstrated to evolve through various stages during the life of the product. By plotting a chart with respect to time, sales exhibit a typically slow start, then a period of rapid growth, before slowing, peaking, and declining again. 

The practical problems however in plotting the future of any new product may be far more difficult to achieve than the theory might suggest. For some the timeline may extend over years, for others it may be a matter of months. By the time you have collated sufficient data to detect the onset of maturity, it may already be too late to decide what to do next. There are some household brands that have been around in basically the same form for a century, while a more fashion related product, may be obsolete in weeks. The life cycle curve is generally seen as exhibiting four phases - introductory, growth, maturity and decline. But with so many other factors affecting sales it is often difficult to state with any real certainty when growth changes to maturity and when is the right time to delete the product completely. This produces forecasting challenges throughout all phases. 

Many products have failed due to poor availability at the onset of the growth phase and allowed better-prepared competitors to take up the demand. But over estimating the growth can equally put a lot of stock on the shelves that cannot be moved without radical action such as deep price cuts. Various manufacturing and logistics techniques aim to match product availability to demand, but for a longer lead-time supply routes - if the goods are shipped by the container load from China for example - then commitment to stock may need to be taken well in advance. Marketing actions can help of course make some impact on the product life cycle curve. Product updates and enhancements may give the product a new lease of life, but generally they only delay the onset of maturity – they don’t prevent it. There is a need to start planning the successor product while sales are still buoyant. 

At the peak of a product’s success it is easy to assume that success will be projected forward indefinitely, then find that a competitive move or new technology are set to change the market situation. 

No comments: